Please ensure Javascript is enabled for purposes of website accessibility

What Should Investors Do if the Stock Market Drops?

By Keith Speights and Brian Orelli, PhD – Jan 3, 2022 at 9:00AM

Key Points

  • If the stock market falls, it gives investors an opportunity to buy shares at cheaper valuations.
  • The difficulty with getting out of the market is knowing when to get back in.
  • Over the long term, temporary stock market downturns won't matter.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Think long term.

Interest rates will almost certainly rise in 2022. That increases the possibility that stocks could fall. In this Motley Fool Live video recorded on Dec. 15, 2021, Fool contributors Keith Speights and Brian Orelli answer a viewer's question about this scenario and give their thoughts about what investors should do if the stock market drops.

10 stocks we like better than Walmart
When our award-winning analyst team has an investing tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

They just revealed what they believe are the ten best stocks for investors to buy right now... and Walmart wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

Stock Advisor returns as of 6/15/21

Keith Speights: Dan has a more broader type of question. Dan says, "PBS' Frontline recently reported that the Federal Reserve has never tried to unravel from 13 years of fiscal stimulus, experts on the show said it could be worse than 2008. What are your thoughts about a major stock market drop as interest rates inevitably increase next year?"

Brian Orelli: Yeah, I don't really deal with trying to time the market based on macro ideas, I just invest all the way through it. I'm still in the accumulation phase and so if stocks go down because interest rates go up, then I'm just buying at cheaper valuations and it's not really going to matter when I retire in 20 years that much whether I held through it or whether I tried to time get out before the drop and then try to get back in, at some point after the drop.

I was thinking the other day I had realized that the pandemic was going to be a pandemic before. Because we were constantly writing about the coronavirus before it was even called COVID-19. I realized it's probably going to cause the stock market to drop and I decided not to sell at that point because I could predict that the stock market was probably going to drop, but I couldn't predict when to get back in.

And I probably wouldn't have gotten back in because we had such a V-shaped recovery so quickly that I'm not sure that I would've been able to get back in at a valuation that was better than the valuation that I would've sold at if I had sold before the pandemic ending. That's my thoughts on macro ideas with the stock market.

Speights: That's a great response. Dan, you heard it: Think long term. In the long term, these interest rate hikes aren't going to matter that much. Yeah, the stock market might fall. It's going to come back. We just don't know when. We don't know when it will fall. We don't know when it will come back, but it will.

The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.